Samsung is set to terminate its multimillion-dollar shirt sponsorship deal with English Premier League leaders Chelsea FC at the end of this current season, sources have told Business Insider, which also understands Turkish Airways is due to take over as kit sponsors and signing up to a much larger deal that could include the club’s stadium.
The contract for the current estimated $US16m-a-year shirt deal (before extra bonuses are paid out if the club gets to the late stages at major competitions such as the UEFA Champions League, for example) will not be renewed this year, sources have told Business Insider, as Samsung is unprepared to pay the $US32m-per-season now being asked.
This confirms a report from the MailOnline last month, which also suggested Turkish Airlines were the front-runners to replace Samsung as shirt sponsors.
It turns out that Chelsea is looking to secure a deal far larger than shirt sponsorship alone. Sources tell Business Insider that its commercial team has been out meeting prospective sponsors and agencies to tout not only the shirt deal but potentially a sponsorship package also including the stadium, training ground and training kit.
Packaging many deals under one sponsor does mean Chelsea could potentially receive less in sponsorship revenue than if it sold them out separately to different brands. (That would be interesting on its own, as Chelsea’s sponsorship revenues have historically lagged far behind those of rival clubs. The $US16 million annual Samsung is less than half what London rivals Arsenal get for their shirt from the Emirates airline.)
We asked MediaCom UK managing director James Hough (who is not involved with any of the Chelsea negotiations) what the advantages of a bundled deal are. Ultimately, it’s up-front, guaranteed income:
Whilst some clubs are prepared to stick with the more traditional tiered sponsorship structure of shirt plus sector-exclusive partner and supplier level deals below that, others may believe that they can generate more revenue by breaking down their most valuable assets — shirt, stadium naming rights, and training kit sponsorship — and packaging these up for one main sponsor.
This becomes more difficult to do when you get a sponsor badging an existing stadium (e.g. Sports Direct Arena with Newcastle FC), and tends to work best when you a club moves to a new venue e.g. the Emirates stadium for Arsenal. This is something that I’m sure will be front of mind for Liverpool FC or Everton’s new stadium, and the same for Chelsea FC if they were ever able to move to a new venue.
Chelsea has been looking for a sponsor of its Stamford Bridge stadium for more than two years, Business Insider understands, but it is not as attractive proposition as some of the newer (and frankly better-looking) grounds in the league.
Chelsea believes the value of its brand has risen dramatically since the original deal was signed with Samsung in 2006, as since then the club has won the Premier League twice (in 2006 and 2010), The UEFA Champions League once (in 2012), The UEFA Europa League (in 2013) and the FA Cup four times (in 2007, 2009, 2010 and 2012), among other honours. The club is also looking to bring its sponsorship income more in-line with Premier League rivals such as Manchester United which this season kicked off an estimated $US80m per season shirt sponsorship deal with Chevrolet.
Why Samsung is calling time on Chelsea
Samsung has been famed in recent years for its big-budget marketing splurges but this year it has been forced to embark on a number of cost-cutting measures, including lowering its overall marketing budget compared with 2013. Profits in its second quarter fell two a two-year low as it was hit by a slowdown in smartphone sales and a stronger Korean currency.
While a simple explanation for the decision to terminate the Chelsea contract would be to simply cut out excessive up-front costs, Business Insider also understands Samsung’s UK marketers have request the global team end the deal because it does not fit with the brand’s current marketing strategy in the region.
In the UK, Samsung embarked on a mission last year to become the country’s “most loved brand” — not just in tech, but out of all the brands UK consumers come across. Linking with a football club, which has many supporters but also many haters, does not fit this strategy.
It’s also worth bearing in mind that shirt sponsorship deals are usually signed for companies to raise awareness of their brands — and awareness is certainly not an issue Samsung, the world’s largest smartphone maker, currently needs to overcome.
Turkish Airlines, however, still has an awareness job to fulfil, both in Europe (it is the fourth biggest European airline) and beyond.
The airline is already the kit sponsor for Turkish club Galatasary for its 2014-15 UEFA Champions League and has previously signed deals to become the official carrier of clubs including Manchester United, Borussia Dortmund, Olympique de Marseille and Aston Villa. It also has individual deals with footballers including Barcelona’s Lionel Messi and Manchester United’s Wayne Rooney.
Business Insider has contacted Samsung, Chelsea FC and Turkish Airlines with requests for comment. This article will be updated when those are received.
Samsung has responded:
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